Sluggish private investments prompt Centre to conduct survey
The Union statistics ministry will survey private sector capital investment to address its lag behind public spending, vital for India's growth and jobs.
The Union statistics ministry is planning a survey of private sector capital investment which has lagged public capex in recent years, a government official said, given its importance for growth and jobs in Asia’s third-largest economy.
The survey will examine all kinds of capital spending by the private sector in the last three years. In a first, it will also put out capex estimates for the next two years, counting fixed assets by type.
“The ministry is planning a forward-looking capex survey to fill the gap in private sector investment. The survey on private sector capex intentions, along with other surveys, is aimed at compiling information which will assist central and state ministries, and industries,” Saurabh Garg, secretary of ministry of statistics and programme implementation said.
Government fixed capital formation (GFCF), a measure of public spending on assets and infrastructure, has outstripped private sector investment in India, though there have been signs of a pick-up.
For FY25, the central government has budgeted capital spending of ₹11.11 trillion, or 3.4% of GDP. In 2019, the government had cut corporate taxes from 30% to 22%, hoping the move would boost private investment.
Investment in infrastructure such as machinery and equipment, as well as ports, airports and highways is a key driver of growth. Government economists have pointed to the need for a faster pace of private sector investments, hoping that government’s own spending will attract private expenditure.
{{/usCountry}}Investment in infrastructure such as machinery and equipment, as well as ports, airports and highways is a key driver of growth. Government economists have pointed to the need for a faster pace of private sector investments, hoping that government’s own spending will attract private expenditure.
{{/usCountry}}“Early corporate sector data for FY24 suggest that capital formation in the private sector continued to expand but at a slower rate,” the government’s Economic Survey 2023-2024 unveiled in July said. India’s growth has largely come on the back of heavy public investments in the last several years, especially since the pandemic, the survey added.
{{/usCountry}}“Early corporate sector data for FY24 suggest that capital formation in the private sector continued to expand but at a slower rate,” the government’s Economic Survey 2023-2024 unveiled in July said. India’s growth has largely come on the back of heavy public investments in the last several years, especially since the pandemic, the survey added.
{{/usCountry}}“One of the reasons for the sluggish private investment is lower consumption growth. Along with it, higher cost of capital (or loans) has contributed to this,” said Ishwar Anand, an economist with Delhi University.
{{/usCountry}}“One of the reasons for the sluggish private investment is lower consumption growth. Along with it, higher cost of capital (or loans) has contributed to this,” said Ishwar Anand, an economist with Delhi University.
{{/usCountry}}Between FY19 and FY23, the cumulative growth in private sector non-financial GFCF stood at 52% in current (inflation unadjusted) prices, official data show. During the same period, the cumulative growth in capex spending by government (including states) was 64%.
Although that’s not a huge gap, private spending in job-creating assets, such as machinery and equipment, grew only 35% while investment in “sunk costs” towards buildings and dwellings grew 105%. “This is not a healthy mix,” the survey had noted.
